A SWISS life-settlements firm called Rigi Capital Partners (RCP) recently considered buying the life-insurance policy of an elderly woman apparently suffering from dementia. RCP would take over payment of the policy premiums and receive the full death benefit when she passed away. Her medical records revealed that she had forgotten even her son’s birthday. But Robin Willi, RCP’s owner, searched Facebook to find out more about her. Her profile suggested she had a vibrant social life, not dementia. Reckoning that she was much healthier than she wanted to appear, Mr Willi did not offer to buy her policy.

Medical records can be deceptive, incomplete or expensive to analyse. Mr Willi thinks that publicly available data will be increasingly useful in helping insurers distinguish the aerobics enthusiasts from the couch potatoes. His firm is small enough to be able to search for data manually. For bigger insurers, software is now being developed by technology firms such as Allfinanz and TCP LifeSystems to sift through all the marketing data that might help them identify tomorrow’s cancer patients or accident victims.Such information can be bought from marketing firms that aggregate data about individuals from records of things like prescription-drug and other retail sales, product warranties, consumer surveys, magazine subscriptions and, in some cases, credit-card spending. At least two big American life insurers already waive medical exams for some prospective customers partly because marketing data suggest that they have healthy lifestyles, says Tim Hill of Milliman, a consultancy that advises insurers on data-mining software systems.

Interesting that insurers are using a much broader set of data (reliable or NOT, validated or NOT, truthful or NOT) to make coverage decisions. Fact = data quality is a huge issue, data completeness is very spotty at best, and insurers have no viable capability to fix this.

What is completely missing is any opportunity for the insured candidate to dispute any negative decision and the information on which that decision was made. Negative = incorrect decisions will be made, and those that are damaged by a poor decision have no way to contest it. Insurers have ALL the power; those insured (or not) have no voice at all.

And, what I have not heard is insurers reducing their premiums because they insure a healthier population. Realizing the benefits of reduced costs will lag, but insurers will be more than happy to pocket the savings before passing it on to their population. Pro = higher profits for the insurers.